Ghana to Apply for Extension on IMF Credit Program This Week

Updated on
  • Government seeks 8-month delay after failing to cut spending
  • Administration says it is paying for sins of previous leaders

Accra, Ghana.

Photographer: Ty Wright/Bloomberg

Ghana will ask for an eight-month extension to its credit program with the International Monetary Fund this week after failing to rein in public spending last year, Deputy Finance Minister Charles Adu Boahen said.

The world’s second-biggest cocoa producer will ask the Washington-based lender to extend the $918 million, three-year debt-support program due to end in April 2018 to December of that year, he said.

While the IMF recommended that the plan be extended to allow Ghana more time to reach fiscal-consolidation targets, the nation sought better terms. Its budget deficit was 8.7 percent of gross domestic product in 2016 against a target of 5.3 percent.

“The IMF has made it a condition and directed that the extension is needed to complete all reviews for a successful program,” Boahen said Tuesday in an interview in the capital, Accra. “As a government, we had to comply to ensure the objectives of the program are achieved.”

Yields Advance

The yield on Ghana’s dollar debt maturing in August 2023 advanced for the first time in six days, increasing 10 basis points to 7.416 percent at 2:22 p.m. in Accra.

The requirement that the program should be extended “shows the IMF must be concerned about the government’s fiscal stance,” Simon Quijano-Evans, an emerging-market strategist at London-based Legal & General Investment Management Ltd., which oversees about $1.2 trillion of assets. said by phone. “That is the point the market would need clarification on.”

The administration of President Nana Akufo-Addo, who came to power in January, was “paying for the sins” of the government of former leader John Mahama after the Finance Ministry earlier this year discovered $1.6 billion in previously undeclared expenses, Boahen said. “We know we are more than capable of bringing our debt down to more sustainable levels,” he said.

Read more: IMF Says Ghana at Risk of Debt Distress as Bond Planned

Ghana’s debt rose to 73 percent of GDP at the end of last year, from 72 percent in 2015, Finance Ministry data show.

“An extension of the program is by no means a magic bullet for Ghana,” Manji Cheto, a senior vice president at Teneo Intelligence in London, said in an emailed response to questions. “Much will depend on what the actual terms of the extension are.”

(Updates with bonds in fifth paragraph.)
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